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Government Finances
LC Economics
| Term | Definition |
|---|---|
| Functions of Taxation | Finance Government Activities. Achieve Economic Objectives. Redistribution of National Wealth. Automatic Stabiliser. Social objectives. Promote enterprise. |
| Canon's of Taxation | Equity, Economy, Certainty, Convenience |
| Equity of Taxation | The tax system must be fair and take into account the ability-to-pay principle |
| Economy of Taxation | The costs of collecting taxes should be as low as possible. The income collected should be greater than the cost of collection. |
| Certainty of Taxation | The amount paid should be certain and clear. A taxpayer should know when they are paying tax and how much tax they are paying. |
| Convenience of Taxation | The tax should be collected in a way and at a time which is convenient for the taxpayer. It |
| Taxation Revenues | Monies/incomes received by the government in the form of direct & indirect taxes, and used in the running of the country. |
| Regressive tax | a tax that does not take into account the ability to pay of a taxpayer. It takes a higher percentage from a low income earner. |
| Progressive tax | a tax that does take into account the ability to pay of a tax payer. |
| Tax avoidance | (Legal) involves organising your affairs to avoid paying tax or to reduce tax liability. |
| Tax evasion | (Illegal) involves organising your affairs to illegally avoid paying tax or to reduce your tax liability. |
| The tax wedge | the difference between the cost to an employer of its employee and the take home wage of the employee as a result of taxation |
| Tax Harmonisation | policy of the EU that aims to make tax regimes similar in all EU member states |
| The imposition or impact of taxation | the individual, firm or commodity on which a tax is levied. |
| The incidence of taxation | the individual or firm, which actually end up paying the tax. |
| Revenue Buoyancy | a situation where the revenue (income) collected by the government is greater than the amount the government predicted it would collect during the year. |
| Direct taxes | taxes on incomes and wealth. |
| Income Taxed | Charged at 20% & 41% |
| PAYE | Pay as Your Earn. Income tax paid by employees |
| Self assessed Income taxed | When a person is responsible for completing their own tax return to the Revenue. Generally people who run their own business. |
| DIRT | Charged on interest earned. Currently 41% |
| Capital Gains Tax | a tax on profits made from the sale of assets (second homes, shares). |
| Capital acquisitions tax | a tax on gifts and inheritances received. The closer your relationship to the giver the less you pay. |
| Corporation tax | a tax on company profits. |
| Indirect taxes | taxes on goods and services |
| Value added Tax (VAT) | is a tax on the sale of goods and services |
| Excise duty | a tax put on certain products to discourage consumption |
| Customs Duty | a tax on imports from outside the EU. It varies depending on the product being imported |
| Stamp duty | Duties payable on a wide range of legal and commercial documents, including (but not limited to) conveyances of property |
| Advantages of Direct Taxes | Equity. Economy. Certainty. Convenience. Adjustable. |
| Disadvantages of Direct Taxes | Work may be discouraged. Investment is discouraged. When direct taxes rise, there may be an increase in the size of the black economy. Savings are discouraged |
| Advantages Of Indirect Taxes | Economy. Convenience. Work/investments are not discouraged by indirect taxes. Environmental/Social Benefits |
| Disadvantages of Indirect Taxes | Inequitable. Inflationary |
| Ways to eliminate income inequalities | Welfare benefits could be increased. Tax changes. Wealth tax. Target universal entitlements. Increase the minimum wage rate |
| Government Current Budget | Outlines the government’s planned revenues and expenditures for the forthcoming year for day to day purposes |
| Current Budget Deficit | Current government expenditure exceeds current government revenue |
| Government Capital Budget | Outlines the government's planned expenditure on items not used up during the year but which increase the productive capacity of the country |
| Exchequer Borrowing Requirement (Exchequer Balance) | The amount borrowed by central government to fund a current budget deficit and any borrowing for capital purposes |
| Public Sector Borrowing Requirement (General Government Balance) | The exchequer borrowing requirement plus borrowing for semi-state/state sponsored bodies and local authorities. |
| Positive consequences of a Current Budget Surplus | Reduced inflationary pressures. Managing our finances. Adhering to EU guidelines. Scope for taxation reforms. Uses of this increased govt. revenue. |
| Negative consequences of a Current Budget Surplus | Rise in conflicting expectations.Public Sector Workers seek increases. Tax reductions sought. Government financial planning inept. Opportunity costs of a surplus. |
| National Debt | This is the total amount of outstanding borrowing by the government. |
| Reasons for the National Debt | Improved Public services: o Increased spending on infrastructure: o Future Economic Growth: o Self-Liquidating debt: |
| Role of the National Treasury Management Agency | Borrowing on behalf of the Irish Government / sale of government bonds. Managing the Irish National Debt on behalf of the government. Managing of the National Pension Reserve Fund. Managing Dormant Account Fund. Handles Personal injuries claims |
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